March 1, 2018

JF1276: Giving Away Half Of Your Real Estate Investing Profits with Steve Rosenberg

Steve is the CEO of a company that has a $26 billion loan portfolio. He attributes the company’s success to their philosophy and practice of giving away at least 50% of to people that need it. Curious how giving away so much makes a company rapidly grow? Tune in to hear how that has happened for Mr. Rosenberg. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Steve Rosenberg Real Estate Background:

CEO and Founder of Greystone, a real estate lending, investment, and advisory company

-Responsible for the coordination and management of corporate matters

-Founded Greystone in 1988 as an independent investment banking firm & developed it into a mature investment firm

-Greystone closed on $550 Million Freddie Mac Loan to Refinance Moinian’s Sky, the largest residential tower in U.S.

-Say hi to him at

-Based in New York, New York

-Best Ever Book: Peace Like a River

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Steve Rosenberg. How are you doing, Steve?

Steve Rosenberg: Great, Joe. Thanks for having me on.

Joe Fairless: My pleasure, nice to have you on. A little bit about Steve – he is the CEO and founder of Greystone, which is a real estate lending, investment and advisory company. They’ve just closed on a 550 million dollar Freddie Mac loan to refinance the largest residential tower in the United States. Needless to say, they’ve got some track record and experience that comes with them.

Steve founded Greystone in 1988, as an independent investment banking firm, and developed into a mature investment firm. With that being said, Steve, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Steve Rosenberg: Sure, thanks a lot, Joe. I was the head of housing finance at Dean Witter Reynolds before I started Greystone, and frankly, Dean Witter was a large company, and there’s a certain culture at large companies that is you just have to be a certain kind of person to do well there, and you have to know how to play the politics and you have to fit into that culture, and I really didn’t. So as I saw the writing on the wall and I saw that there really wasn’t much of a future there for me, I decided to start Greystone.

I just started in the back of my friend’s music store, trying to call potential clients and see if they would use me to refinance loans. Somehow, through those conversations and some of the work I had done at Dean Witter before, I started building up a small clientele. Over the years – now it’s been 30 years – what’s really been interesting is that Greystone has been built into a fairly large institutional player. We’ve got in excess of 7,000 employees. What’s really interesting though is that we’ve never raised any capital ever in our history. Even though we’re a principal lender and our loan portfolio is about 26 billion dollars at this point, we’ve never gone outside and raised equity. It’s always been whatever profits we made, or meager profits certainly at the beginning that we made – we invested those back in the company, and what’s maybe the most amazing fact of all, Joe, is that throughout our history we believe in enhancing the lives of others, and at least 50% of our profits have always gone to charitable causes.

Every year, no matter how well or not well we did, at least 50% of the profit that we made went to help other people’s lives and just enhancing other people’s lives. So in spite of the fact that I myself am pretty much an introvert, and we’ve never raised any equity, in every year we’ve given away at least half of our profits… Notwithstanding all of that, somehow there’s a certain magic to helping other people, and notwithstanding all of that, again, the company just keeps growing.

Joe Fairless: I was gonna ask you to clarify it if was 15% or 50%, and then you said half, so obviously I know the answer… 50% – that is incredible. In 1998 you were giving away half of your profits to charity?

Steve Rosenberg: In 1988.

Joe Fairless: Yeah, I did it again… [laughs] 1988.

Steve Rosenberg: Yes, when we were making almost nothing, at least half went out. These days we’re giving more than half. The mission of the company is to do what we do well, and that’s doing business, but that’s just the mechanism for generating profits that we can give away to help other people live a better life. So I would say that we’re not great, loud institutional givers; there are great – whether or not it’s the Red Cross or whether or not it’s The American Cancer Society or other great, great not-for-profits… That’s not the target of our giving.

What we do is we have a network literally around the world where families that flow on hard times, whether or not it’s a child that gets sick that needs an operation, or whether or not it’s a new kind of cancer therapy that has come out but hasn’t yet been approved by the insurance companies… We’ll just step up, write the check, and just help the situation. So we really target families and individuals that were it not for us being able to do what we do, they just wouldn’t be able to get help anywhere.

It’s incredibly fulfilling and empowering, but the bottom line is the mission of the company is not to enrich me or the other senior managers. The mission of the company is really to help other people.

Joe Fairless: How do you choose where you give? You said you have a network – can you elaborate on that?

Steve Rosenberg: Sure. We have a network of people literally around the world, whether or not it’s in Europe, in the Middle East, even in Asia, even Australia, where somehow, whether or not it’s a rabbi or a priest or a nun — we had heard that in Cameroon, for example, there was unfortunately a high percentage of AIDS in the population, and yet children walking the streets that, because both parents had passed away, and there was a sense in the community that because both their parents died of AIDS, that somehow they were contagious… And so even their relatives didn’t take them in.

There was a nun that opened up a home for them… It wasn’t an orphanage where they were gonna be adopted, but it was just a home. So we had heard about this and we had heard about what she was doing, and she was taking care of 45 kids at the time. We looked into it, we gave them the money to built the capacity to take 250 kids. That was in Cameroon. We helped kids that needed operations that we heard about in Australia…

It’s kind of interesting, once you put yourself out there and people know that you wanna help, things come to you. I think that’s kind of the karma or a certain energy, but when you wanna help people, the cases come in. We’ve never had a problem having to advertise that we wanna help people. People find out and cases come in.

Joe Fairless: I’m gonna ask you to speculate, and as a person who’s been in the real estate lending business for 30+ years you might not like it, but I’m still gonna ask you to do it, and just play along with me for a second… Your company has a loan portfolio of 26+ billion dollars, right?

Steve Rosenberg: Right.

Joe Fairless: What would you guess your loan portfolio would be today if instead of giving 50% over the last 50%+ over the last 30 years, you gave 10%?

Steve Rosenberg: What’s interesting, Joe, is that I attribute the success of the firm to our giving. If you ask me, I think there’s a great chance that had we not given all of this money away, we might not even be in business. The fact that we weathered the Great Recession in 2007-2009, when banks were left and right pulling credit lines from us… It was just a very, very difficult time, and we don’t have any large institution behind us. There’s no insurance company, pension fund or any institutional investors, it’s just us. The fact that we were able to survive that time and just keep growing, notwithstanding the fact that we’re giving so much money away… I actually attribute our success and our growth to our giving. So I wouldn’t be surprised if we weren’t even in business if we hadn’t done it.

Joe Fairless: And digging a little bit deeper in that, because I assumed you were gonna go with that approach, and I love it, and I’d just love to learn more about why you say that, and maybe speak to the analytical Best Ever listener who’s listening to you like “Yeah, yeah, but why are you saying that? How was there a cause and effect? How did the numbers shake out?”

Steve Rosenberg: I would say this – if I tried to establish a cause and effect, which I’m always reticent to do, I don’t think that I can logically prove it. But if we just look back on history and we say we started with nothing, we’ve given most of it away, and I can assure you that I am not an extrovert – it’s hard for me to ask anyone to do anything – there is no logical explanation to how the company has grown the way it has. There just isn’t.

By the same token, what I can tell you is that so much of business is — sure, you wanna be smart and you wanna make the right decisions, but so much of it is being at the right place, at the right time, having someone like you that didn’t have to like you, having the market go in your favor when it didn’t have to… There’s just so much that has to go right for businesses to prosper. It’s just my sense that things fall into place even when you would expect that they wouldn’t, when they certainly don’t have to; it’s my personal feeling that I attribute that to our philanthropy and the fact that we really just love other people and feel like we’re in business to help people. I understand that there may not be a business case for that, except that there’s a book that recently came out; Adam Grant is a professor at the University of Pennsylvania-Wharton, and Adam came out with a book called Givers and Takers. He makes the business case for extending yourself for others just creates a positive business environment and actually creates successful business.

I would just recommend that that Best Ever listener that’s out there right now that’s scratching his head, rolling his/her eyes and saying “Hey, this is just a bunch of malarkey”, pick up the book. What I can tell you is that my career and my history with the firm is evident that the book is right.

Joe Fairless: What’s been a tough decision that you’ve had to make with this company over the last 30 years?

Steve Rosenberg: The hardest decisions that I have to make are ones that affect people’s lives. Sometimes people come to Greystone and we expect great things from them and sometimes it just doesn’t work out. To have to have that conversation with someone where we know that they’ll be better off at a different place, because either they don’t fit the culture here, or for whatever reason the skillset that is required to do this job is not the skillset that they have, but the skillset that they do have could be very well utilized at a different company – having that conversation I find is the hardest conversation to have… Because again, I feel like I’m here and our company is here to enhance the lives of employees and other people in the outside world, and whenever you have to have a conversation where you’re telling somebody it’s just not working out, that’s a tough conversation to have. We try never to surprise anybody with that, but those are the hardest parts of my job.

Joe Fairless: And what’s your approach in that conversation?

Steve Rosenberg: Well, I think you always wanna be kind, because what you’re really doing is sure, the conversation that you’re having is for the company’s best interest, but it’s also the individual’s best interest, and people do well at jobs that they love. I think you rarely find a situation where someone does extremely well at something that they don’t love, or that they don’t do well at something that they’re absolutely in love with. So I think the idea is to be as kind and gentle — and not only that, as helpful as possible in finding their next job. But I think that trying to help them do that, trying to be kind and supportive to them, and also giving people constant feedback… Because no one should ever be surprised when someone tells them that it’s time to find another position. And if they are surprised, it only means that the management of the firm hasn’t been giving them the feedback that every employee deserves. Every employee coming in to work every day needs to know whether or not they’re a rockstar or whether or not they’re failing at their job. If they don’t know that, then shame on the management, because that’s’ what they owe every employee.

Joe Fairless: I’m gonna switch gears a little bit because I mentioned it in the intro, and that is you all closed on a 550 million dollars Freddie Mac loan to refinance the largest residential tower in the US, which is in Manhattan… Tell us about that.

Steve Rosenberg: This is a project that was done by the Moinian Group, which is one of the best-known development companies in New York. They create very high-end properties. This was on 42nd Street on the West side of Manhattan. This was a tower, it was very creative financing, that 550 million, as you mentioned… And it’s one of the largest  transactions ever done by Freddie Mac, and it’s one of the things that Greystone does – the loans that we do are generally guaranteed by either HUD, which is a US government agency (the Department of Housing and Urban Development) or Fannie Mae, which is another kind of government-related entity, or Freddie Mac.

This loan was guaranteed by Freddie Mac, and again, I’m very proud of the financing and I think the owners Moinian Group was very happy with it, and we were very happy with it, and so was Freddie Mac.

Joe Fairless: This is gonna be a tough question to answer, but as objectively as you can be, why do you think they selected your group versus three or four other groups that I’m sure they were looking at?

Steve Rosenberg: I think that when you think about Greystone and the fact that we started with nothing, and give most of our profits away and still have grown… I would say that the one thing that we do that others don’t is besides the fact — everyone works hard; I think we work harder. I think there’s very little business that we get because we just say “Give us a shot.” We always are bringing something to the table that the competition doesn’t. We use our capital in our balance sheet I would say more aggressively and more creatively than any other lender in our space.

Sometimes we’re doing a loan for a client and the loan falls several million short. We’ll use our own capital to fill in that gap, because we don’t want the client to be disappointed and we wanna have a successful financing. Lots of times we’re financing an acquisition for a client, and one of the client’s investors falls out at the 11th hour; we use our own capital to fill in the cap and fund that amount of that lost investor, and we’ll give the client six months to find another investor, or a year to find another investor.

So we are constantly doing the double and triple backflip to accommodate clients, and I think that’s the reason that people will come to us. We’re not just creative and we don’t just work hard, we put our money where our mouth is and we’re constantly doing things that the competition literally — if they had to do it, they would just get nauseous. But we do that constantly, and we always feel that we’ve gotta prove ourselves every day, and we do. We’re constantly doing things that others won’t even consider doing. In fact, we’ve created a special group inside Greystone called Special Situations, because borrowers and clients – all sort of things happen in the eleventh hour where we’ve gotta come up with a bunch of cash to help a client out… And we do. It was happening so consistently and so often that we just created a special group called Special Situations; it’s got its own group leader, and when those situations come up, we know we’ve gotta respond within 28-48 hours or within a very short period of time, so we’re prepared to do it.

Joe Fairless: Based on your experience in the industry, what is your best real estate investing advice ever?

Steve Rosenberg: You know, it’s interesting… I’ve always said that when we invest in real estate as well – we own a portfolio of almost 8,000 apartment units and we manage those, and we have a portfolio of skilled nursing facilities and we also manage those… I don’t wanna have to be too smart to this investment. I need to see a clear road to success before we take the risk. So I would say as an investor I am relatively risk-averse. I have the patience to weigh into situations that are complex and try to figure them out, but I don’t wanna have to be a genius and guess at where markets are going to go before I get into a transaction. So I’d like to be able to be conservative and not genius-like at all, and still see the profitability in a transaction. I don’t wanna have to be that smart.

Joe Fairless: We’re gonna do a Best Ever Lightning Round. Are you ready for the Best Ever Lightning Round?

Steve Rosenberg: Okay.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:20:03].28] to [00:20:55].16]

Joe Fairless: Okay, Steve, best ever book you’ve read?

Steve Rosenberg: A book that I recommend to everyone is a book called Peace Like a River. What I love about that book (it is a novel) is the author uses commonly used words, but he puts them together in very uncommon ways. I am such a fan of how human beings  communicate with each other. I feel like lots of times I’m talking to someone and as I’m listening to them I can just tell that there’s something in their brain that they wanna say to me, and they’re not looking to see whether or not I’m really understanding what they’re saying. So I think communication is a very unique skill, I don’t think too many people have it, and I think the author in this book, Peace Like a River, just communicates in such a unique and effective way using small words.

Joe Fairless: Best ever deal you’ve done?

Steve Rosenberg: I think the best deal I’ve ever done is hiring the senior management that supports me and supports the firm. I think it’s all about the people, and I think the best deal I’ve ever done is hiring people that are not just hard workers and creative, but have huge hearts and are just generally kind and generous and good people. That’s clearly the best deal I’ve ever done.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Steve Rosenberg: The greatest mistake I’ve made on a transaction was thinking that I could protect myself with documents. I saw that a client wasn’t behaving in an upright or forthright way, and I felt like my lawyers were good enough and I was good enough to structure the transaction so that I couldn’t get her. I’ve never failed to be disappointed whenever I thought too much of my ability to structure the right transaction.

If a client doesn’t have integrity and they are not people that you would want to do business with, it’s best not to do business with them. That’s been my mistake. I’ve always thought too much about our ability to structure around a lack of integrity.

Joe Fairless: How can the Best Ever listeners get in touch with you or learn more about your company?

Steve Rosenberg: The best way is probably our website, which is I’m Steve Rosenberg, I’m extremely accessible, and I’m happy to help or talk to anyone. It doesn’t have to result in business for Greystone. Again, I’m here to help people live better lives, and if I can be helpful to anyone that’s listening, or to you, Joe, I’m happy to do that.

Joe Fairless: A very refreshing conversation… I thoroughly enjoyed our time together, Steve. Thank you for talking about your business approach throughout the last 30+ years. At least 50% of the profits have gone to charitable causes, and while you certainly weren’t doing that with the intention of getting a dollar amount in your portfolio, which is now 26 billion, we kind of reverse-engineered that in a hypothetical scenario and perhaps you wouldn’t even be in business if you didn’t take that approach. You might be not giving yourself enough credit, but I know where you’re coming from.

You talked about the book that Adam Grant wrote, Givers and Takers – we’ll check that out… And you’ve talked about the bunch of intangibles in business that have to go right for a business to prosper. Basically, you’re building up your karma bank by taking this approach.

Thank you for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Steve Rosenberg: Thank you, Joe.

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